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Why the EU-New Zealand free trade deal is important

July 10, 2023

Brussels says the bloc's trade with New Zealand could now grow by 80%. In a first for an EU trade pact, there is a section that commits both sides to targets to tackle climate change.

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A meat grader stamps mutton for export at an Auckland meat processing plant on March 2nd, 2001
The EU-New Zealand trade deal took five years to negotiateImage: NAASHON ZALK/AFP via Getty Images

On Sunday, the European Union signed a free trade deal with New Zealand after more than five years of negotiations.

Brussels said the agreement will pave the way for EU states to boost investment in the South Pacific nation by up to 80% and increase bilateral trade by nearly a third.

European Commission President Ursula von der Leyen said the deal would bring "major opportunities for our companies, our farmers and our consumers, on both sides" and would help drive "just and green growth."

New Zealand Prime Minister Chris Hipkins said the agreement with the country's fourth-largest trading partner would "generate substantial new economic opportunities."

What are the key points of the deal?

The deal eliminates all tariffs on EU exports to New Zealand, cutting some €140 million ($154 million) a year in duties.

Tariffs will be eliminated on key EU exports such as pig meat, wine and sparkling wine, chocolate, sugar confectionary and biscuits.

The New Zealand services market, including financial services, telecommunications, maritime transport and delivery services, will be opened up further to EU players.

New Zealand exporters will benefit from significantly improved access to the EU market and some 91% of New Zealand's current trade into the EU will enter duty free from day one. 

When fully implemented after seven years, 97% of current New Zealand trade will enter the EU duty free. 

A New Zealand government statement said the country would gain up to €1 billion in exports to the 27-nation bloc every year.

Within a decade, bilateral trade could grow up to 30% from the current €12.6 billion in goods and services, according to the European Commission.

Annual EU exports to New Zealand have the potential to grow by up to €4.5 billion in the same period, Brussels said.

Beyond the tariff cuts, the deal will protect well-known EU products in New Zealand, including Prosecco, Polish vodka, Rioja wine, Champagne and Tokaji, as well as traditional food products made in the bloc.

New Zealand Prime Minister Chris Hipkins (3rd from left) and European Commission President Ursula von der Leyen (4th) at a signing ceremony in Brussels on July 9th, 2023
The trade deal will eliminate most tariffs on trade between the EU and New ZealandImage: Dati Bendo/EU

Net zero ambitions written into pact 

In a first for an EU trade deal, the agreement contains ambitious outcomes to tackle climate change and makes these commitments enforceable. 

The Commission statement said the text has a dedicated sustainable food systems chapter, a dedicated trade and gender equality article and a specific provision on trade and fossil fuel subsidies reform.

The deal has a specific list of green goods and services — such as renewable energy and energy-saving products — that will be free of tariffs from the first day.

The EU has made it a priority that future trade agreements include targets for sustainable development.

New Zealand: Climate-neutral sheep

New Zealand-Australian farmers cry foul

New Zealand farmers have complained about the lack of improved access to the EU market for their products, blaming protectionist lobbying by the bloc's agriculture sector.

Under the new deal, Brussels will retain the use of quotas for some Kiwi dairy products, including beef and sheep meat, ethanol and sweetcorn.

New Zealand will be allowed to export just 10,000 tons of beef to serve the EU market of over 450 million people who between them consume some 6.5 million tons of beef products a year.

However, there is a small quota increase for New Zealand lamb exports.

The Sydney Morning Herald reported that Australian farmers had urged their own trade minister to walk away from negotiations with Brussels if the bloc offers a deal akin to the one signed with New Zealand.

"We’d say walk away, thanks but no thanks," Tony Mahar, chief executive of the National Farmers Federation, was cited as saying. "If it doesn't mean commercial dollars then we're not interested."

Brussels has so far ruled out giving Australia increased market access to its sheep, beef, dairy and sugar markets.

Negotiations between Australia and the EU for a free trade deal began around the same time as New Zealand.

What happens now?

The New Zealand deal must now be approved by the European and New Zealand parliaments before it can enter into force.

Brussels says it could take effect in the first half of 2024.

Edited by: Ashutosh Pandey